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Chapter 7. Location. Location, Location, Location. Important because? Prime consideration for customer’s choice Big sustainable competitive advantage 3 types of Location Shopping Center City or Town Location Freestanding Location. Shopping Centers.

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chapter 7

Chapter 7


location location location
Location, Location, Location
  • Important because?
    • Prime consideration for customer’s choice
    • Big sustainable competitive advantage
  • 3 types of Location
    • Shopping Center
    • City or Town Location
    • Freestanding Location
shopping centers
Shopping Centers
  • Group of retail and other commercial establishments that is planned, developed, owned, and managed as a single property
    • Strip Centers – parking directly in front of stores, open canopies may connect stores but no enclosed walkways.
    • Malls – enclosed, climate-controlled walkways,
strip shopping centers
Strip Shopping Centers

Traditional – designed to provide convenient shopping for daily shopping within a neighborhood

Power Centers – bigger with more anchor stores. May have freestanding anchors. Few small specially tenants. May be located near malls

shopping malls
Shopping Malls
  • Advantages
    • Entertainment
    • Tenant mix can be planned
    • Controlled external environment
  • Disadvantages
    • Higher rent
    • Lack of control over operations (hours,displays)
    • Intense competition with centers
shopping malls1
Shopping Malls
  • Problems malls are facing
    • Increased competition from alternative locations
    • Shoppers are looking for value alternatives
    • Buildings are getting old
  • What malls are doing
    • Renting to nontrad tenants (dr offices, chapels,,,)
    • Focusing on entertainment
    • Demalling
types of shopping malls
Types of Shopping Malls
  • Regional Centers
    • General merchandise mostly apparel
    • Anchored by department and discount stores
  • Superregional Centers
    • Mall of America
    • Bigger in every way
  • Lifestyle Centers
    • Outdoor traditional streetscape layout
    • Sit-down restaurants and a variety of retailers (no discount stores)
types of malls cont
Types of Malls cont.
  • Fashion/Specialty Centers
    • Similar to lifestyle centers
    • Upscale apparel, boutiques, and gift shops
    • Located in high income trade areas
  • Outlet Centers
    • Consist mostly of manufacturers stores sell their brands supposedly at a discount
    • Strip configuration – enclosed mall – village cluster
    • Located away from regional centers often in touristy areas
types of malls cont1
Types of Malls Cont.
  • Theme/Festival Centers
    • Center that have unified themes (architectural design and even merchandise
    • Tourists appeal – Often located in places of historical interest
    • No large stores
  • Merchandise Kiosks
    • Offer limited merchandise assortment
    • Relatively inexpensive, short term leases, often seasonal
city or town locations
City or Town Locations
  • These locations are typically unplanned, have multiple owners, and have access from the street
  • Central Business Districts (CBD)
    • Inner-City Locations
    • Main Street Locations
city or town locations1
City or Town Locations
  • CBD – is the traditional downtown business area in a city or town.
    • Declining in popularity
      • High crime rates, urban decay, weather
      • Lack of planning, limited parking
  • Inner-city Locations – high-density urban area populated primarily by ethnic groups
    • High profit potential but must culturally sensitive and involved in the community, customized assortment
city or town locations2
City or Town Locations
  • Main Street Locations
    • CBD located in the traditional shopping area of smaller towns or secondary business district in suburb
    • Cost are generally lower along with traffic
    • Generally smaller overall selection
redevelopment efforts in city and town locations
Redevelopment Efforts in City and Town Locations
  • Many are undergoing gentrification (the process of renewing and rebuilding buildings)
  • Malls declining
  • Occupancy cost lower
  • Higher profits due to lower competition and stable customer base
  • Cities often provide incentives
  • Retail location that’s not connected to other retailers
  • Large space requirements
  • Advantages
    • Greater visibility
    • Lower rents
    • Ample parking
    • No direct competition
    • Few restrictions on signs, hours, or merchandise
  • Disadvantages
    • Lack of synergy with other stores
    • Must be a destination
      • Offer special merchandise, price, promotion, or services
other retail location
Other Retail Location
  • MXD’s (Mixed-Use Developments) – combine several different uses in one complexs
    • Airports
    • Resorts
    • Hospitals
    • Store within a Store

Location CBD Strip Shopping Free

Issues Center Mall Standing

Security - - + -

Long, uniform - + + +

hours of


Planned - - + -



tenant mix

Parking - + - +

Occupancy ? + - +


(e.g. rent)

Relative Advantages of Major Retail Locations


Location City Strip Shopping Free

Issues Center Mall Standing

Pedestrian + - + -


Landlord + + - +


Strong + + - +


Tax ? ???


Relative Advantages of Major Retail Locations

department store location strategy
Department store location strategy
  • Usually located in CBD and in regional and superregional shopping centers
  • These formats draw a large number of people
  • Shopping Goods
specialty apparel stores
Specialty Apparel Stores
  • Thrive in CBD’s Main Street locations, and most types of malls
  • These location draw large numbers and offer entertainment and recreation
  • These location facilitate comparison shopping
  • Specialty goods
category specialist
Category Specialist
  • Found in Power Centers or in Freestanding location
    • Helps keeps cost down
    • Good parking (large items)
    • Destination store
grocery stores
Grocery Stores
  • Strip Centers
    • Lower costs
    • Less customer travel time
    • Carry convenience goods
  • Wholesale clubs use freestanding
    • People are willing to travel for savings
terms of occupancy
Terms of Occupancy
  • Types of Lease
    • Percentage lease
    • Fixed-rate
percentage lease
Percentage Lease
  • Specified min and max
    • Maximum – Retailer pays % of sales up to a maximum point
    • Minimum – Retailer pays a minimum amount no matter how lows sale go
  • Sliding Scale
    • %/sale amount decreases as sales go up
      • 4% for first $200,000 and 3% for sales> $200,000
fixed rate lease
Fixed-Rate Lease
  • Retailer pays fixed amount monthly rent for the life of the lease
    • Graduated Lease – first 3 years $1,000 per month Next 5 years $1,250
    • Maintenance increase recoupment lease– Allows landlord to increase rent if expenses increase beyond a certain point
    • Net Lease – Retailer pays all maintenance and utilities
terms of the lease
Terms of the Lease
  • Prohibited use clause – No leasing to tenants that take up parking but don’t bring in shoppers (bowling alley)
  • Exclusive use clause – can’t lease to retailers selling competing products
    • Can limit outparcels (banks or fast food) in the parking lot
    • Can specify that the lease release of a complimentary business leaves the shopping center
terms of the lease1
Terms of the Lease
  • Escape Clause
    • Retailer can terminate its lease if sales don’t reach a certain level after a time
legal considerations
Legal Considerations
  • Environmental Issues
    • Retailer can buy insurance to protect against these risk or write responsibility to landlord in the lease
  • Zoning and building codes
  • Signs
  • Licensing Requirements – liquor license